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Crisis Blog: Hopeful Signs For a Greek Deal

Feb 15, 2012 6:34 am EST

Bloomberg

Euro-zone finance ministers ended a conference call over a new bailout and debt restructuring for Greece late Wednesday with their chairman expressing optimism that a long-awaited accord could be wrapped up soon.

Jean-Claude Juncker, the Luxembourg prime minister who chairs the ministers’ meetings, said there had been “substantial further progress” since yesterday in negotiations between Greece and its so-called troika of international official lenders—the European Union, the International Monetary Fund and the European Central Bank.

In a statement after the call, Mr. Juncker said the lenders had received assurances of support for the austerity program that will accompany the deal from the two party leaders in Greece’s ruling coalition—New Democracy leader Antonis Samaras and Socialist party George Papandreou–and said €325 million of additional budget cuts for this year had been identified, as required by the lenders.

But he said further moves were necessary before agreement could be sealed: measures to make sure the agreed economic reform program was implemented and to ensure that servicing the debt would be a priority for Greece.

Earlier Wednesday there new signs of concern as the euro-zone economy shrank in the fourth quarter of 2011 as nine member states posted a fall—five of which entered a recession—raising concerns the wider region will follow.

Data from European statistics agency Eurostat on Wednesday showed that gross domestic product across the 17 regions that share the euro contracted 0.3% in the final quarter of 2011 compared with the third, and grew 0.7% compared with a year earlier.

That is the first quarterly contraction since a 0.2% drop in the second quarter of 2009, while the year-to-year gain is the smallest since the fourth quarter of 2009 when GDP shrank 2.1%. And, for the whole of 2011, Eurostat calculates GDP grew 1.5%, down from 1.9% growth in 2010.

Meanwhile, the Bank of England left open the possibility of further stimulus for the U.K. economy after its latest forecasts showed inflation is likely to remain below its 2% target for the next two years.